RESOLVED that shareholders of Walgreens Boots Alliance Inc. (“WBA”) urge the Compensation and Leadership Performance Committee (the “Committee”) of the board to adopt a policy authorizing the Committee to decline to pay in full an award (a “Bonus”) to a senior executive or group of senior executives under any annual cash incentive program (“Bonus Program”) that is based on one or more financial measurements (a “Financial Metric”) whose performance measurement period (“PMP”) is one year or shorter for a period (the “Deferral Period”) following the award. The policy should include a methodology for determining the length of the Deferral Period, should the Committee decide to defer, and adjusting the unpaid portion of the Bonus over the Deferral Period, in each case that allows accurate assessment of risks taken during the PMP that could have affected performance on the Financial Metric(s) and facilitates recoupment pursuant to WBA’s recoupment policy.

The changes should be implemented in a way that does not violate any existing contractual obligation or the terms of any compensation or benefit plan currently in effect.

Supporting Statement: As long-term shareholders, we support compensation policies that align senior executives’ incentives with the company’s long-term success. We are concerned that short-term incentive plans can encourage senior executives to take on excessive risk.

In our view, the opioid crisis reflects overly risky behavior by companies in the supply chain, including retailers such as Walgreens. That behavior has led to costly litigation, as well as civil and criminal enforcement actions, with potential financial and reputational consequences. Walgreens is a defendant in the multi-district opioid litigation in Ohio.

To foster a longer-term orientation, this proposal asks that the Committee develop a policy on bonus deferral; the Committee would have discretion to set the terms and mechanics of this process. Bonus deferral is widely used in the banking industry, where overly risky behavior was widely viewed as contributing to the financial crisis. The Financial Stability Board’s Principles for Sound Compensation Practices state that bonus deferral is “particularly important” because it allows “late-arriving information about risk-taking and outcomes” to alter payouts and reduces the need to claw back compensation already paid out, which may “fac[e] legal barriers,” in the event of misconduct. Banking supervisors in 16 jurisdictions, including the US, have requirements or expectations regarding bonus deferral.
(https://www.fsb.org/wp-content/uploads/P170619-1.pdf) Pharmaceutical manufacturers GlaxoSmithKline and Novartis defer a portion of annual bonuses into equity that does not immediately vest.

We urge shareholders to vote FOR this proposal